The gender pensions gap – what is it and why does it matter?

The gender pay gap often takes centre stage when discussing gender equality, and rightly so. However, another important part of financial inequality between men and women often flies under the radar: the gender pensions gap.

What is the gender pensions gap?

The gender pensions gap (GPG) is the disparity between pensions savings and income between male and female. Women retire on average with pension savings of £69,000, compared to £205,000 for men. A huge difference of £136,800.

Why is the gender pensions gap a problem?

There are a number of factors contributing to the disparity in financial resilience in retirement, including:

• Pay: women, on average, earn less than men throughout their careers, also known as the gender pay gap. This has improved in recent years as many employers now pay males and females equally for doing the same role. However, lots of business still have males in higher paid positions so they earn more on average. Lower earnings directly translate into reduced contributions to pension schemes, leading to smaller retirement funds for women.
• Nature of employment: women are more likely to work part-time or in temporary positions which normally don’t offer the same benefits to full-time employment, such as employee pension schemes and retirement benefits.
• Career interruptions: women are more likely to experience career interruptions: to give birth and take care of children, look after elderly parents, or care for family members with disabilities. In 2023, 74% of women were in employment compared with 83% of men. These breaks from the workforce result in lower pension contributions and missed opportunities for career advancement, doubling down on the pensions gap.
• Life expectancy: women tend to live longer than men, with an average life expectancy of 82. The average life expectancy for a man is 78. Living for longer requires a larger retirement pot to fund the additional years so there’s a higher risk of outliving their savings and facing financial insecurity in old age.

Bridging the gender pension gap: what can women do?

1. Make sure you’re being paid properly

Research what you’re worth and if you’re not getting it, then ask for it. It’s against the law for businesses to pay men more than woman for the same job, so make sure they’re fulfilling this responsibility.

2. Start early, pay more

It’s difficult to be ahead of the curve when it comes to pensions and retirement savings, so it pays to start as early as possible and contribute as much as possible. Regardless of gender, age, or salary, lots of us still aren’t saving enough to fund even the most basic retirement. The Pensions and Lifetime Savings Association (PLSA) estimate a ‘moderate’ retirement will cost around £31,300 for someone living on their own, or £43,100 for a couple. So start saving today!

3. Maximise employer contributions

Some employers incentivise increasing your own workplace pension contributions by upping contributions their side too. This is known as ‘contribution matching’.

For example, if you currently contribute 5% of your salary to your workplace pension and your employer matches with 5%. You could consider increasing your contributions to 8% and your employer might offer to match this as well.

For the average UK salary (£33,000), this could mean an extra £1,980 going into your workplace pension each year, where it can be invested in the stock market to grow further. There are tax when you make your contributions, and you also benefit from pension tax relief on growth and income.

4. Take advantage of hybrid and flexible working

The pandemic forced businesses to adapt working patterns and offer more flexible working arrangements for employees.
Many businesses now adopt a ‘hybrid’ approach to working. This has created opportunity for people to take less time off work during their career, and find a better balance between work commitments and family duties, especially women who often bear the brunt of caregiving and childcare responsibilities.

5. Keep track of your pensions

It’s estimated that millennials change jobs on average once every two to three years and will actually have four completely different careers throughout their lifetime.

This often results in people losing track of their pensions. Finding a lost pension could make a considerable difference to your total pension pot.

Start by making a list of everywhere you’ve worked for over the years and check to see if you have the pension paperwork for them. If you’ve lost the details of a pension scheme, the government’s tracing service might be able to assist you. If you’re not sure about your next steps, talking to a financial coach can help you get a clearer understanding of your situation now and the options available to you to improve your financial future.